HEALTH DEPARTMENT: MAKE BETTER USE OF OUTCOME-BASED CONTRACTS

Problem Identification:It is difficult to determine whether the Department systematically measures the effectiveness of individual service providers so as to direct funds to providers that produce the best outcomes.

Recommended Action:Make better use of outcome-based contracts.

Classification:Cost Savings, Organizational, Service Improvement

Functional/Operational Area:All Departmental Operations

Estimated Annual Impact:Cannot be Estimated

Estimated Implementation Cost:Not Determined

Barriers to Implementation:Unwillingness by some providers to link the extension of service contracts to the achievement of quantifiable service outcomes. The limited number of providers in some areas of health services restricts the Department’s contracting options.
Projected Implementation:Ongoing

Next Steps:As part of its contract development process, the Department must include provider performance criteria, service goals, and outcome objectives in all future agreements.

Analysis:The Department contracts with a large number of third-party providers to deliver health-related services to Baltimore’s citizens. In FY2000, nearly $111.5 million (over 75 percent) of the Department’s operating budget constituted contractual service costs.

Contracts represent the primary mechanism through which the Department can articulate performance standards and expectations and require providers to monitor service outcomes and share data. Considering the Department’s annual responsibility for a portfolio of contracts that exceeds $110 million, it is in a strong position to dictate terms that are consistent with the Department’s efforts to improve its ability measure performance.

Through improved performance monitoring of contract providers the Department can make more informed funding decisions. In sum, the Department can reward the best providers with future financial support and reduce or eliminate support to under-performing providers. Additionally, better outcome-data could strengthen the Department’s case in appealing to the State and other funders for resources needed to address priority health issues, such as substance abuse.